What is defined as a budget deficit?

A budget deficit occurs when government spending exceeds its revenues during a specific period, usually a fiscal year. This situation indicates that the government is spending more money than it is bringing in through taxes and other forms of income.

This can lead to the need for borrowing to cover the gap, which can impact future budgets if the government accumulates significant debt. A budget deficit is a crucial concept in macroeconomics as it reflects the financial health of a government and can influence economic policy decisions.

In contrast, taxation exceeding government spending would indicate a budget surplus, while equal spending and revenue would signify a balanced budget. Government investments growing, on the other hand, does not directly relate to the concept of a budget deficit, as it does not address the relationship between spending and revenues.